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Manufacturing Order Variances Understanding the Variances Created during MO Close and Purge.

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Presentation on theme: "Manufacturing Order Variances Understanding the Variances Created during MO Close and Purge."— Presentation transcript:

1 Manufacturing Order Variances Understanding the Variances Created during MO Close and Purge

2 Overview MO variances are created during the MO Close & Purge MO Close and Purge is the equivalent of a period close for WIP XA creates multiple variances for each MO These variances can be booked to a single account or to multiple accounts depending on the rules

3 T Accounts -Material InventoryWIP IP IU IP IU IX Uncontrolled Floorstock IX

4 T Accounts - Labor InventoryWIP IP IU IP IU IX LSSA LRSA Uncontrolled Floorstock IX Earned Labor LSSA LRSA

5 T Accounts - Overhead InventoryWIP IP IU IP IU IX LSSA LRSA LOHD Uncontrolled Floorstock IX Earned Labor LSSA LRSA Overhead Absorption LOHD

6 T Accounts – Material Receipt InventoryWIP IP IU IP IU IX LSSA LRSA LOHD Uncontrolled Floorstock IX Earned Labor LSSA LRSA Overhead Absorption LOHD RM

7 Variances VMCS – Material Cost Variance VMUS – Material Usage Variance VSCO – Setup Labor Cost Variance VSUS – Setup Labor Efficiency Variance VRCO – Run Labor Cost Variance VRUS – Run Labor Efficiency Variance VOCO – Overhead Cost Variance VOUS – Overhead Efficiency Variance

8 Variances VEAC – Miscellaneous Charge Cost Variance VCLO – Order Closeout Total Order variance is reported on the Order Closeout Accounting Detail report –Order Closeout Report can be re-run from the MO History Reports Detail variances are reported on the Order Closeout Variance Report at time of Close and Purge –Close and Purge is the only time that Order Closeout Variance Report is created, it cannot be re-run at a later date

9 Order Detail Accounting Format Order Summary Material Detail Operation Detail

10 Order Detail Accounting Format Order Totals Formula for calculating variance is: Setup (lbr) + (Run) Labor + Overhead + Mtl & Pur + Miscellaneous = Total Actual Total Actual – Receipt (RM) = Difference (Variance)

11 T Account - WIP Setup Labor – Run Labor – Overhead – Material & Purchase – Miscellaneous – 0.00 Total Actual – 1, Receipt (RM) – Variance (to zero out the value in WIP) –

12 GLI History XA has always had the option to create the Order Detail Accounting Format report for total variance When GL Interfaces were created, individual variances were required Order Closeout Variance Analysis report was created to detail the individual variances –Report shows each item and operation to calculate variances –Variances are summarized on last page Sum of the variances must equal the variance on the Order Closeout Accounting Detail report

13 VMCS VSCO VRCO VOCO VEAC

14 VMUS VSUS VRUS VOUS

15 Material Variances VMCS – Material Cost Variance –When the MO is created, the bill of material is copied to the MO –The standard cost of each component part is copied to the MO –If the cost of the component is changed between the time that the MO is created and the time of the IP transaction, a VMCS variance will be created

16 Material Variances VMUS – Material Usage Variance –When the bill of material is copied to the MO, the extended quantity of each component is copied as the standard quantity –If an Unplanned Issue (IU) transaction is entered, and the Standard Quantity is entered, it will be used to calculate Usage variance –Any difference between standard quantity and quantity issued will be part of the VMUS

17 Material Variances Labor/Overhead Variances

18 VMUS VMCS

19 T Accounts – Material Variances InventoryWIP IP IU IP IU IX LSSA LRSA LOHD Uncontrolled Floorstock IX Earned Labor LSSA LRSA Overhead Absorption LOHD RM VMCS=.01 VMUS= RM Variances VMCS VMUS

20 Labor Variances VSCO/VRCO – Setup and Run Cost Variances –PC&C tailoring determines if labor will be valued at Production Facility standard or employee pay rate (requires XA Payroll) If tailored for Payroll, difference between Facility standard and employee pay rate will be reported in the CO variances –If Facility Standard Cost is changed from the time that the MO is created, difference will be CO variance PC&C tailoring question determines if MO standard will be changed when Facility standard is changed

21 Labor Variances VSUS/VRUS – Setup and Run Labor Efficiency Variances –If the actual time charged to the job is different from the standard, difference will be charged to the US variance –If a Time Basis Code was used in the operation (Run Labor), XA will calculate the hours per piece –Actual Run Hours will be divided by the quantity complete plus quantity scrapped to determine per piece actual time

22 VSUS VRUS VSCO VRCO

23 T Accounts – Labor Variances InventoryWIP IP IU Uncontrolled Floorstock IX Earned Labor LSSA LRSA Overhead Absorption LOHD RM Material Variances VMCS VMUS Labor Variances VSCO VRUS VRCO RM VMCS=.01 VMUS= VSCO= VRUS= IP IU IX LSSA LRSA LOHD VRCO = 19.22

24 Overhead Variances VOCO – Overhead Cost Variance –If the overhead rate/percent changes from the time that the MO was created to the time that labor was charged to the operations, difference will be reported in the VOCO transactions –PC&C tailoring question determines if facility rates in the MO are updated when the facility costs are changed –Machine variances (if machine time is entered in the routing) will be included in the Overhead Variances

25 Overhead Variances VOUS – Overhead Efficiency Variances –Setup and Run Labor Efficiency variances will be extended by the overhead rate/percent (depending on the Overhead Code of the facility) –If Machine times are entered in the routing, Machine cost variances will be included with the overhead variances

26 VOUS VOCO

27 T Accounts – Overhead Variances InventoryWIP IP IU IP IU IX LSSA LRSA LOHD VRCO = Uncontrolled Floorstock IX Earned Labor LSSA LRSA Overhead Absorption LOHD RM Material Variances VMCS VMUS Labor Variances VSCO VRUS VRCO Overhead Variances VOCO VOUS RM VMCS=.01 VMUS= VSCO= VRUS= VOCO= VOUS=390.15

28 Order Closeout Variance Cost, Efficiency and Usage Variances are totaled Sum of these variances are subtracted from the total variance as calculated by the Order Closeout Accounting Detail report Difference is the VCLO – Order Close Variance

29 Calculation VCLO

30 T Accounts – Overhead Variances InventoryWIP IP IU IP IU IX LSSA LRSA LOHD VRCO = Uncontrolled Floorstock IX Earned Labor LSSA LRSA Overhead Absorption LOHD RM Material Variances VMCS VMUS VCLO Labor Variances VSCO VRUS VRCO Overhead Variances VOCO VOUS RM VMCS=.01 VMUS= VSCO= VRUS= VOCO= VOUS= VCLO= 53.50

31 Potential Reasons for VCLO VCLO records unexplainable (by XA) variances Incorrect/missing cost for item ordered (i.e. cost on RM is wrong) Unplanned Issue (IU) transactions where Standard Quantity is entered Operation added to MO Scrap

32 Scrap costs can be collected via –The SM transaction in Inventory Management –The SCRP transaction in PC&C SM transaction is valued at the finished items standard cost SCRP transaction is valued at the pro-rated cost of scrap at the operation where scrap was reported Cost of Scrap is included in MO Closeout Total Cost so it needs to be booked to the variance account to remove scrap from variance

33 Cost Total Sheet Pro-rated cost of Scrap (SCRP)

34 T Accounts – Overhead Variances InventoryWIP IP IU IP IU IX LSSA LRSA LOHD VRCO = Uncontrolled Floorstock IX Earned Labor LSSA LRSA Overhead Absorption LOHD RM Material Variances VMCS VMUS VCLO Labor Variances VSCO VRUS VRCO Overhead Variances VOCO VOUS RM VMCS=.01 VMUS= VSCO= VRUS= VOCO= VOUS= VCLO= Scrap SCRP

35 Rules Individual rules for each variance type do not have to be created GL rules for transactions with asterisks in them are wildcard transactions and can be used to create a single rule for multiple transactions For example, all MO variances could be booked to the same account with a rule for V***

36 Variance Transactions

37

38 Summary MO Variances provide a diagnostic tool to review the accuracy of the bill of material, material movement transactions and routing standard times By analyzing the orders with the largest variances (favorable or unfavorable) and correcting the condition that caused them will make a companys data/information much stronger!


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